99% of UK businesses are classed as small to medium enterprises (SME) in the UK. A UK SME employs less than 250 staff. So, that’s nearly 5.6 million businesses employing 16.3m people or nearly 61% of the workforce. Even the Government’s own target was to involve SMEs in their supply chain in up to 33% of cases by the end of 2022[1]. So, supporting SMEs is the key to UK economic growth as well as fairness, income distribution and regional investment. Read on to find out more.
Supporting SMEs
It sounds obvious that if nearly 61% of the workforce work in businesses with less than 250 staff, this is key to our economy. However, there are only around 2,700[2] companies with more than 1,000 staff in the UK who attract a disproportionate amount of investment. Typically, these larger enterprises are located in dense population centres with access to plentiful labour resource. Many SMEs are located in less densely populated areas which in turn suffer from under-investment.
The Public Services (Social Value) Act 2013 requires people who commission public services to think about how they can also secure wider social, economic and environmental benefits. The very definition of social value to the UK Government lay in widespread social, economic and environmental benefits. This means looking outside of the largest, most well-known organisations in major conurbations and securing value for an area or stakeholders. As we shall see, this isn’t always as simple as it may seem, public sector or not.
How to genuinely support SMEs
There are both conscious and unconscious barriers to hiring and working with SMEs. Whilst it is noble to want to work with smaller employers, many people simply haven’t heard of or discovered the hidden talents and capabilities of some SMEs. Furthermore, many SMEs do not bid for large contracts, public sector tenders or work outside of their locale. So, are good intentions enough to spread social, economic and environmental benefits? This is where we should be supporting SMEs to be considered for and to apply for work.
Bringing SMEs into consideration
There are a number of considerations to ensure that more work is directed towards SMEs to meet social value objectives. These could include:
- Targets such as in The Public Services (Social Value) Act 2013.
- Corporate Governance codes of conduct.
- Compulsory reporting of supplier spend by company size.
- Review of procurement selection criteria.
- Review of preferred supplier lists (PSLs).
- Parliamentary and local authority promotion of SMEs to boost social value.
- Chambers of Commerce to promote opportunities to SME members.
- Tender portals to explicitly state the locale and size of desired SME suppliers.
- Review tender processes for fairness to SME applicants.
- Consider if the scale of work packages are suitable for SMEs.
Attracting SMEs to tender
With the above representing something more akin to a ‘push’ towards SMEs, the scene is set to attract or ‘pull’ them. Many SMEs are reluctant to bid for large contracts or embark on complex public sector tender exercises. So, here are a few suggestions to attract SMEs:
- Advertise contracts and tenders where SMEs can apply.
- Communicate how procurement models make it simple for SMEs.
- Transparent tender routes that make it clear for SMEs.
- Lower procurement thresholds that do not restrict smaller suppliers.
- Remove procurement criteria that don’t apply to SMEs.
- Offer grants or local authority funding to bid for contracts.
- Offer skills training where SMEs may not meet all the criteria.
- Explicitly state which contracts and tenders are aimed at SMEs.
- Break work down into manageable projects or deliverables for SMEs.
- Enforce and audit delivery of social value through SME contract awards.
Economic growth via supporting SMEs
While it’s true that the largest organisations often have the resources and capabilities that SMEs cannot match, they don’t have it all their own way. SMEs are renowned for agility, creativity and ingenuity that immovable and rigid corporate structures struggle with. When we consider the innovation required to hit net zero by 2050, this is one industry in which SMEs can really help. Additionally, as the UK tries to innovate its way to growth, seeking advantages over our competitors, SMEs are often at the forefront – first to embrace new techniques, start-ups with bright ideas and unforeseen, disruptive business models.
However, it isn’t all forged in the white heat of industry and technological innovation. SMEs have other advantages too. Excellence in customer service? SMEs are simpler, more agile and more able to respond with a personal touch. Owners and directors are often accessible rather than celebrity or power figures. Employee experience? Yes, they can often give a flexibility to express yourself and bring more of yourself to work than corporate behemoths. Finally, there is what SMEs give back. SMEs tend to be rooted in their local area. In fact, only 2.2% of businesses operate across more than one site[3]. As a result, they are closer to local needs and challenges – ideally placed to deliver social value if they are given the oxygen to grow.
Helping SMEs in the present and the future
Here at Think Beyond, a micro-business that operates a single office, we support clients from 50 to 100,000 staff. We work with boards and senior leaders to accelerate time to value and enhance your business performance. With experience working in supporting SMEs, corporates and blue chips, we understand the challenges and advantages of each business model. We are proud to operate in Knutsford, East Cheshire but support national and international clients.
If you would like to tune up your SME performance, why not call us on 01565 632206.
Alternatively, we would be delighted to arrange a call with you if you request a video call.
Finally, why not check out our recent business award and our finalist nomination as an SME punching above its weight.
[1] UK Gov data
[2] ONS data
[3] ONS data